Piecemeal solutions

EIGHT public enterprises that have made over Rs. 3 billion in losses will either be liquidated or restructured under public-private partnerships, Parliament was told last week. This will come as good news to many, but steps to rein in other institutions remain in the shadows.

Failing to find viable solutions will lead these establishments to a wind up with Voluntary Retirement Schemes (VRS) being provided for the employees in a few cases, with the remainder given the opportunity to get absorbed into other State ventures.

According to Deputy Finance Minister Sarath Amunugama, these ventures are Janatha Fertilizer Company Ltd., Hingurana Sugar Industries Ltd., Kantale Sugar Industries Ltd., Sri Lanka Rubber Manufacturing Export Company Ltd., Lanka Salusala Ltd., Lanka Fabrics Ltd., Co-operative Wholesale Establishment and State Co-operative Wholesale Establishment Company.

Incidentally two of these companies are part of 13 other Government enterprises that are not under the purview of the Auditor General; State-owned companies which have failed to provide a decent return during the past 10 years but continue to be funded by State coffers, creating controversy, and as the International Monetary Fund pointed out, resulting in job losses for the common man.

Amazingly, none of these loss-making companies are audited by the Auditor General’s Department but subjected to a private audit, which has “no binding with the shareholders,” which includes the Government. Mihin Lanka Ltd., Shipping and Aviation Information and Research Ltd., Polipto Lanka Ltd., Sri Lanka Thriposha Ltd., Rakna Arakshaka Lanka Ltd., Lanka Logistic and Technologies, Sri Lanka Savings Bank, Lankaputhra Development Bank Ltd., Sri Lanka Insurance Corporation Ltd., State Trading (Co-Operative) Wholesale Co Ltd., Lanka Sathosa, State Resources Management Corporation and Gal-Oya Plantation Ltd. are the 13 companies established during the past 10 years.

Of these companies only Sri Lanka Insurance has managed to accrue profits and pay taxes, a return on investment that the Government badly needs. Yet the financial governance of these institutions is not being regulated by the Auditor General. Deputy Finance Minister Dr. Sarath Amunugama has justified the move insisting that the companies were under a separate department and therefore need not be under the Auditor General.

Yet the seriousness of the financial losses faced by some of the companies demand that the usage of public funds be strictly monitored. The best example is Mihin Lanka, which has been a bleeding sore since the day it was launched, incurring losses of a whopping Rs. 8.5 billion since its inception five years ago under the authority of President Mahinda Rajapaksa.

Yet there has been no attempt made by authorities to stem the haemorrhage. It was reported that the cash-strapped budget airline has suffered a loss of Rs. 2 billion during the 2012 financial year alone, according to the Auditor General.

IMF Chief Koshy Mathai giving his evaluation of the economy warned that losses of the Ceylon Petroleum Corporation (CPC) and Ceylon Electricity Board (CEB), which totalled Rs. 150 billion in 2012, hidden through loans from State banks, would reduce capital for other businesses that create growth-driven jobs and drive up interest rates, bringing pressure on the entire economy. It is imperative that a large, more inclusive and fast-tracked mechanism needs to be put in place for SOEs not only to be privatised but also for better monitoring of those that remain under the Government.